Japan's Nikkei Closes at Two-Decade Low
By Michael Tsang
Tokyo, April 11 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 Stock Average rounding off its worst week in 10 at a two-decade low. Some of the nation's largest companies such as Toyota Motor Corp. dropped on concern corporate pension funds are selling their shares to transfer the money to government managers.
Toyota, Japan's No. 2 company by market value, slumped to its lowest in almost seven years. Sony Corp., the maker of Vaio computers, dropped to its lowest in more than four years.
``It's like a body blow to the market,'' said Taiji Yoshida, who helps handle the equivalent of $23.7 billion as a fund manager at Yasuda Capital Management Co. ``As more companies return their pension funds to the government, their pension fund managers have no choice but to sell.''
The Nikkei declined 163.63, or 2.1 percent, to 7816.49 at the 3 p.m. close in Tokyo. The average closed at its lowest since Jan. 25, 1983 and also recorded its fourth 20-year low this year. The Topix index lost 10.17, or 1.3 percent, to 782.25. Eight of Japan's 10 biggest companies by market capitalization declined.
The average fell 3.2 percent this week, its worst loss since the five days ended Jan. 31. The Topix dropped 1.7 percent.
Optimism over a swift end to the war in Iraq, which spurred the Nikkei's 2.2 percent gain on April 7 as allied forces stormed Baghdad, receded as a deadly virus spread though Asia. Concern U.S. earnings will indicate that demand in the world's largest economy may not soon improve also pushed shares lower.
Nikkei futures for June delivery fell 1.6 percent to 7850 in Osaka and shed 1.3 percent to 7870 in Singapore.
Some 702 billion yen shares traded, 22 percent more than the daily three-month average. Losing stocks outnumbered those that gained by 703 to 668 in the Tokyo Stock Exchange's first section.
Pension Funds
Since April 2001, companies have been allowed to return part of their pensions to the government to avoid losses that result when returns fall short of promised levels. In some cases, the shift allows a company to book a gain or reverse a charge taken earlier for a shortfall in the plan.
Many companies are asking money managers they have hired to handle their employees' pensions to redeem the funds into cash, pushing lower shares such as Toyota, Sony and Takeda that form the bulk of corporate pensions' stockholdings.
Toyota, the world's third-largest automaker, dropped 100 yen, or 3.9 percent, to 2,500, the lowest since July 1996.
Sony fell 140 yen, or 3.6 percent, to 3,770. Takeda Chemical Industries Ltd. slid 220 yen, or 5.3 percent, to 3,920. Takeda, Japan's biggest drugmaker, dropped to its lowest in four years.
Toyota, Sony and Takeda Chemical have been the three worst performing stocks on the 1,515-member Topix since the new business year began this month.
Government Proposals
Among other widely held stocks, Fuji Photo Film Co., the world's second-largest maker of film, dropped 260 yen, or 7.8 percent, to 3,100. The stock fell for a ninth day in 10 and slumped to its lowest since July 1996.
NTT DoCoMo Inc., Japan's largest company by market capitalization, declined 5,000 yen, or 2.1 percent, to 238,000.
Meanwhile, the government also proposed in February to let companies to hand over their funds as securities instead of cash for domestic equities and bonds.
Companies will have to give the government a fund designed to track the Topix. While many corporate pensions already hold shares in Japan's biggest companies, they often lack the smaller holdings needed to closely match the index.
To raise cash to buy smaller company stocks, they often sell bigger shares, some analysts said.
The Topix Small-Cap index, which tracks the performance of stocks on the Tokyo Stock Exchange's first section excluding the 500 biggest companies, gained 2.9 percent this fiscal year, compared with a 0.7 percent drop in the broader Topix.
`Rushing'
``Pension funds rushing to sell seem to be putting serious downward pressure on the overall market,'' said Norihito Kanai, who helps manage the equivalent of $2.5 billion at Meiji Dresdner Asset Management Co. ``We're seeing some short-term traders, including hedge funds, seize the opportunity to short shares before corporate pension funds begin to sell.''
Some 491 private pensions out of 1,653 have been approved by the government to return parts of their funds as of April 1, according to figures provided by the Pension Fund Association.
About 3 trillion yen that pension funds want to transfer to the government in Asia's biggest stock market is in stock, according to a report by Credit Suisse First Boston.
Sumitomo Mitsui, NTT
Companies that rely on domestic demand advanced because they are less affected by changes in the global economic outlook and the war in Iraq, some investors said.
``Investors seem to be shifting money to some domestic-demand related stocks as a temporary refuge until we can better assess the war in Iraq,'' said Meiji Dresdner Asset's Kanai.
Sumitomo Mitsui Financial Group Inc., Japan's No. 2 bank, gained 15,000 yen, or 8.3 percent, to 195,000. UFJ Holdings Inc., the nation's No. 4 bank, fell 2,000 yen, or 2 percent, to 103,000.
Nippon Telegraph & Telephone Corp., Japan's largest telephone company, rose 1,000 yen, or 0.2 percent, to 415,000.
Elsewhere, Orix Corp. dropped 260 yen, or 5 percent to 4,940 yen. Japan's biggest non-bank finance company fell to a six-year low after it said it may book a 3 billion yen ($25 million) loss from the failures of United Airlines Inc. and Air Canada.
Orix, which leases planes and lends to airlines, is also affected by moves by carriers to cut flights as a deadly pneumonia- like virus, known as SARS, reduces travel.
Minebea Co. fell 28 yen, or 7.2 percent, to 362. The world's biggest maker of miniature ball bearings said it slumped to a loss for the year ended March 31, missing its profit forecast, on charges related to closing subsidiaries and stock value losses.
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